Fund Times: Justice Department Faces off with Gabelli
Plus, Fidelity manager changes, new Van Kampen funds, and more.
As reported by the Wall Street Journal, the U.S. Justice Department is joining a lawsuit against Mario Gabelli. The lawsuit claims that Gabelli, portfolio manager of six distinct retail mutual funds and CEO of Gabelli Asset Management Company, created "sham" companies to bid on FCC cellphone licenses between 1995 and 2000, under rules favoring small and minority-run businesses. Allegedly, Gabelli then resold the licenses for a profit.
The lawsuit claims Gabelli received $160 million in discounts and financing breaks for which he wasn't qualified from the FCC, the Journal reported. Gabelli might have to pay the government triple that amount, or $480 million, under the False Claims Act if he loses that case. If the government joins the case, it could seek an additional $205 million in profits Gabelli allegedly made, according to the Journal.
More Fidelity Select Manager Changes
Fidelity Select Paper & Forest Products (FSPFX) has a new management team. Chris Bartel and Justin Bennett this month took the place of Anmol Mehra, who had run the fund since February 2004. Bartel joined Fidelity Investments in 1999 as a research analyst. Until late 2005, Bartel had no previous experience running public mutual funds. Bennett joined Fidelity in August 2005, and also has no previous public track record.
James Morrow and Benjamin Hesse have taken over at Fidelity Select Business Services & Outsourcing (FBSOX) from Nicola Stafford, who had run the fund since October 2004. Morrow joined Fidelity in 1999, and has worked as a research analyst and also manages Fidelity Select Electronics (FSELX). Hesse joined Fidelity in August 2005, and has no public record.
Van Kampen Offers New Fund of Funds
According to a press release, Van Kampen Investments, a subsidiary of New York-based Morgan Stanley (MS), will introduce its first fund of funds, Van Kampen Leaders. The fund will invest one third of its assets each in large-cap value fund Van Kampen Comstock (ACSTX), moderate-allocation fund Van Kampen Equity and Income (ACEIX), and foreign large-growth offering Van Kampen International Growth (VIFAX), each of which have been fairly good options within their Morningstar categories. Funds of funds can offer instant diversification, but they can be expensive because they often charge an expense ratio on top of the fees of the underlying funds. This front-load fund, for example, has a combined 1.62% expense ratio when the fees of the underlying funds are taken into account (or 1.3% after temporary fee waivers).
AIM Delays Shareholder Vote
Here's strong evidence why it's important for shareholders to pay attention to the mail they get from fund companies. It looks like AIM is having trouble collecting the necessary number of votes from shareholders for several fund mergers. They have rescheduled the meeting to vote on these mergers twice so far. Originally, the meeting was held on Feb. 28, 2006, as scheduled, but then a reconvened meeting was held on March 7, 2006, which has been adjourned until March 16, 2006 in order to obtain additional votes. According to AIM, this is fairly common for some funds. Shareholders are being asked to approve the merger of the following funds into other AIM offerings: AIM Aggressive Growth (AAGFX), AIM Blue Chip (ABCAX), AIM Mid Cap Growth (AMCAX), AIM Premier Equity (AVLFX), AIM Small Company Growth (ISGAX), and AIM Weingarten (WEINX).
Leuthold Funds Closing
Leuthold Core Investment (LCORX) and Leuthold Select Industries (LSLTX) will close on March 31, 2006, to current shareholders and new investors. Those investing in existing 401(k) and other retirement plans, however, can still invest. This isn't a surprise. In previous interviews with Morningstar, manager Steve Leuthold had mentioned that the Core Investment fund, which invests in all major asset classes depending on guidance from a quantitative risk model, was nearing its capacity. And Select Industries is essentially a long-only and stock-only version of Core Investment, so it was probably close to its limit as well.
Dieter Bardy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.